The Theory of Money and Credit - Ludwig von Mises [184]
of the world market out of the national market. But whether they succeed in this in each individual case or not depends to a large extent on the strength of the political influence of the opposing interests. For in the case of every individual commodity, the producers' interest in high prices is opposed by the interest of consumers in the opening of the market to the cheapening effect of foreign competition. The matter is only decided by the conflict of the two groups. The distribution of forces is otherwise when the problem of freedom of capital transactions is under discussion. We have already seen that creditor interests always get the worst of it when they clash with debtor interests. The interests of the capitalists are scarcely ever represented in monetary policy. Nobody ever objects to the importation of capital from abroad on the ground that it leads to a depression of the rate of interest in the home market and a reduction of the income of the capitalists; quite the reverse. The universally prevailing view is that it is in the interest of the community that the rate of interest should be as low as possible. In those European states with large capital resources, which so far as international dealings in capital are concerned need be considered only as creditors and not as debtors, this policy is expressed in the endeavor to put obstacles in the way of foreign investment. Undoubtedly, this is not the only point of view from which modern states judge the export of capital. Other considerations enter into the matter as well, some in favor of exportation, some against it. There is, for instance, the fact that it is frequently impossible to export commodities except by allowing the payment for them to be postponed, so that future goods are acquired in exchange for the present goods surrendered; and that for this reason alone it is consequently necessary to promote the export of capital or at least not to hinder it. [10] Nevertheless, it must be insisted that the policy adopted by these states with regard to the export of capital is guided by the endeavor, among others, to keep the domestic rate of interest low. On the other hand, the same motive leads these states which because they are poor in capital have to play the part of international borrowers to encourage its importation.
The attempt to depress the domestic rate of interest by influencing the international movement of capital is particularly pronounced in the so-called money market, that is, in the market for short-term capital investments. In the so-called capital market, that is, the market for long-term capital investments, there is less possibility of effecting anything by intervention; in any case, any steps that may be taken become effective much more quickly in the former than in the latter. Consequently there is a greater propensity toward exerting an influence on the rate of interest on loans in the money market than in the long-term capital market. But the most important cause of the persistence of demands for the exertion of influence upon the money market lies in the universally prevalent errors concerning the nature of fiduciary media and of bank credit. When a relatively small efflux of gold induces the powerful central bank-of-issue of a rich country to raise the discount rate there is a tendency to think that there must be some other way than this, by which the efflux of gold could be prevented without involving the community in what is regarded as the injurious effect of a rise in the rate of interest. It is not seen that what is happening is the automatic adjustment of the national to the world rate of interest owing to the way in which the country is involved in international trade. That the country cannot be cut off from participation in international capital dealings simply and solely by measures of banking and currency policy, is completely overlooked. This alone can explain how it can come about in large exporting countries that the very persons who demand measures for "cheapening" credit are those who benefit most from the export trade.